Don't raise Companies House fees, no, absolutely not

There is a proposal that we should deliberately, with malice aforethought, screw over new company formation because criminals exist. This is not a sensible proposal. Criminals do exist, they need to be dealt with but let’s do this at least, not most, cost to the economy, eh?

Fee for registering a company to increase tenfold under plans to tackle economic crime

Companies House considers charging up to £100 to fund new role fighting flow of dirty money

One little note is that if we make it more expensive to register a company then doing so becomes less attractive to those merely trying to legalise an operating business and makes no difference to the criminals who would abuse the system. We’d deliberately tip the system in favour of the criminals and their vast profit margins that is.

Companies House, the corporate register, is considering the increase in charges as a way of funding new responsibilities to tackle illegal activity that it is gaining under laws going through Parliament. Registration fees currently start at just £10.

The agency is poised to receive beefed-up powers and responsibilities that will require it to police the information submitted by companies and directors, ensuring that it is accurate.

It is part of changes proposed by ministers to stem the tide of dirty money flowing into the UK after new scrutiny in the wake of Russia’s invasion of Ukraine.

Just no.

The deeper point here is that we not just desire we positively gasp for people to both set up new businesses and register them. For this is what produces economic growth - new entrants into the markets. Therefore we want this process to be as simple as possible and as cheap as possible. There is good reason why the time taken, the costs, to register a new business looms so large in the varied economic freedom and ease of doing business listings. For as soon as the costs - whether of time or money - of such formation or registration become appreciable that entire process becomes constipated. To the point that in many economies the process near doesn’t happen at all, there is no movement.

Yes, entirely true, a very simple and very cheap system does indeed allow criminals, money launderers, sanctions busters and the rest to partake. That’s to be dealt with in one of two ways.

The first is simply to shrug and accept it as a cost of having that vibrant new creation system. The second is to treat it as what it is, which is criminals engaging in criminal activity. Something that both can and should be dealt with - but not at that cost of losing the creative vibrancy. If we need a team of accounting sleuths then fine, let’s have a team of accounting sleuths. But let’s charge that cost to where it should be - on policing. Not an extra fee upon the law abiding engaging in this activity, but from the general societal resources we devote to policing.

A second way to approach this is that all economics happens at the margin. So, why do we want to dissuade some - for that’s what margin means, there will be some dissuaded - from setting up legitimate, legal, taxpaying businesses by raising the fee to do so? We don’t, so we shouldn’t. We do want to stop people abusing the system, entirely true. So do that too. But don’t fund the one solution by creating the other problem.

Just no. It is indeed politically appealing to assume that “business” should pay for business. But the people being charged here will not be those abusing the system. Instead we’ll be levying a charge on something we desire to happen - legal registration of business activity - and thereby dissuading it from happening. That’s just not sensible.

So, let’s not do it.